by Calculated Risk on 2/04/2017 09:19:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Feb 4, 2017:

• Another huge week, total US oil rigs up 17 to 583

• Horizontal oil rig counts up +16 to 479
...
• The OPEC deal is looking at trouble ahead—three more weeks of this and the OPEC deal will fall apart

• Cana Woodford has moved distinctly into second place among US shale plays

Click on graph for larger image.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

by Calculated Risk on 2/04/2017 08:09:00 AM

This will be a light week for economic data.

The key economic report this week is December Trade Deficit.

----- Monday, Feb 6th -----
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, Feb 7th-----
6:00 AM ET: NFIB Small Business Optimism Index for January.

8:30 AM: Trade Balance report for December from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through November. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $44.9 billion in December from $45.2 billion in November.

10:00 AM: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in November to 5.522 million from 5.451 million in October.

The number of job openings (yellow) were up 6% year-over-year, and Quits were up 7% year-over-year.

3:00 PM: Consumer credit from the Federal Reserve.  The consensus is for a $20.0 billion increase in credit.

----- Wednesday, Feb 8th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, Feb 9th -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 250 thousand initial claims, up from 246 thousand the previous week.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for December. The consensus is for a 1.0% increase in inventories.

----- Friday, Feb 10th -----
10:00 AM: University of Michigan's Consumer sentiment index (preliminary for February). The consensus is for a reading of 98.0, down from 98.5 in January.

by Calculated Risk on 2/03/2017 03:41:00 PM

The January ISM Non-manufacturing index was at 56.5%, down slightly from 56.6% in December. The employment index increased in January to 54.7%, from 52.7%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management:January 2017 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in January for the 85th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 56.5 percent which is 0.1 percentage point lower than the seasonally adjusted December reading of 56.6. This represents continued growth in the non-manufacturing sector at a slightly slower rate. The Non-Manufacturing Business Activity Index decreased to 60.3 percent, 0.6 percentage point lower than the seasonally adjusted December reading of 60.9 percent, reflecting growth for the 90th consecutive month, at a slightly slower rate in January. The New Orders Index registered 58.6 percent, 2.1 percentage points lower than the seasonally adjusted reading of 60.7 percent in December. The Employment Index increased 2 percentage points in January to 54.7 percent from the seasonally adjusted December reading of 52.7 percent. The Prices Index increased 2.9 percentage points from the seasonally adjusted December reading of 56.1 percent to 59 percent; indicating prices increased for the 10th consecutive month, at a faster rate in January. According to the NMI®, 12 non-manufacturing industries reported growth in January. The non-manufacturing sector begins 2017 with a cooling-off in the rate of growth month-over-month. The sector still reflects strong growth. Respondents' comments are mixed indicating both optimism and a degree of uncertainty in the business outlook as a result of the change in government administration."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This suggests about the same rate of expansion in January as in December.  A solid report.

by Calculated Risk on 2/03/2017 12:36:00 PM

By request, here is another update of an earlier post through the January 2017 employment report including all revisions. This is the final employment report for the Obama presidency (the reference week includes the 12th, and Obama was still President during that period).

And, yes, I will post these graphs during the next Presidential term.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

We frequently use Presidential terms as time markers - we could use Speaker of the House, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

First, here is a table for private sector jobs. The top two private sector terms were both under President Clinton.

The third best growth for the private sector was Obama's 2nd term.

Reagan's 2nd term saw about the same job growth as during Carter's term.  Note: There was a severe recession at the beginning of Reagan's first term (when Volcker raised rates to slow inflation) and a recession near the end of Carter's term (gas prices increased sharply and there was an oil embargo).

Term	Private Sector Jobs Added (000s)
Carter	9,041
Reagan 1	5,360
Reagan 2	9,357
GHW Bush	1,509
Clinton 1	10,883
Clinton 2	10,085
GW Bush 1	-811
GW Bush 2	414
Obama 1	1,937
Obama 2	9,867

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term, and President Obama is in the final months of his second term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (yellow) took office.

There was a recession towards the end of President G.H.W. Bush (purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 811,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 396,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased slightly under President G.H.W. Bush (purple), with 1,510,000 private sector jobs added.

Private sector employment increased by 20,966,000 under President Clinton (light blue), by 14,717,000 under President Reagan (yellow), and 9,041,000 under President Carter (dashed green).

There were only 1,937,000 more private sector jobs at the end of Mr. Obama's first term.  At the end of his second term, there were 11,804,000 more private sector jobs than when Mr. Obama initially took office.

 A big difference between the presidencies has been public sector employment.  Note the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).

However the public sector has declined significantly since Mr. Obama took office (down 303,000 jobs). This has been a significant drag on overall employment.

And a table for public sector jobs. Public sector jobs declined the most during Obama's first term, and increased the most during Reagan's 2nd term.

Term	Public Sector Jobs Added (000s)
Carter	1,304
Reagan 1	-24
Reagan 2	1,438
GHW Bush	1,127
Clinton 1	692
Clinton 2	1,242
GW Bush 1	900
GW Bush 2	844
Obama 1	-708
Obama 2	404

Below is a table of the top five presidential terms for total non-farm job creation.

Obama's 2nd term was the 3rd best ever for private job creation.  However, with very few public sector jobs added, Obama's 2nd term was only the fifth best for total job creation.

Top Employment Gains per Presidential Terms (000s)
Rank	Term	Private	Public	Total Non-Farm
1	Clinton 1	10,883	692	11,575
2	Clinton 2	10,085	1,242	11,317
3	Reagan 2	9,357	1,438	10,795
4	Carter	9,041	1,304	10,345
5	Obama 2	9,867	404	10,271

by Calculated Risk on 2/03/2017 09:55:00 AM

The headline jobs number was above expectations, however there were combined downward revisions to the previous two months. Overall this was a solid report.

Earlier: January Employment Report: 227,000 Jobs, 4.8% Unemployment Rate

In January, the year-over-year change was 2.34 million jobs.

Average Hourly Earnings

Click on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in January.

This is generally trending up, but this index is noisy and the pace of wage growth slowed in January.

Employment-Population Ratio, 25 to 54 years old

Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate was unchanged in January at 81.5%, and the 25 to 54 employment population ratio was unchanged at 78.2%.

The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in January at 5.8 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find full-time jobs.

The number of persons working part time for economic reasons increased in January. This level suggests slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 9.4% in January.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.85 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.83 million in December.

This is generally trending down, but still elevated.

Overall this was another solid report.

by Calculated Risk on 2/03/2017 08:49:00 AM

From the BLS:

Total nonfarm payroll employment increased by 227,000 in January, and the unemployment rate was little changed at 4.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in retail trade, construction, and financial activities.
...
The change in total nonfarm payroll employment for November was revised down from +204,000 to +164,000, and the change for December was revised up from +156,000 to +157,000. With these revisions, employment gains in November and December combined were 39,000 lower than previously reported.
...
In January, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26.00, following a 6-cent increase in December. Over the year, average hourly earnings have risen by 2.5 percent.
...
[Annual Benchmark Revision] The total nonfarm employment level for March 2016 was revised downward by 60,000 (-81,000 on a not seasonally adjusted basis, or -0.1 percent). ... The effect of these revisions on the underlying trend in nonfarm payroll employment was minor.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 227 thousand in January (private payrolls increased 237 thousand).

Payrolls for November and December were revised down by a combined 39 thousand.

This graph shows the year-over-year change in total non-farm employment since 1968.

In January, the year-over-year change was 2.34 million jobs.  This is a solid year-over-year gain.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate increased in January to 62.9%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio was increased to 59.9% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate increased in January to 4.8%.

This was above expectations of 175,000 jobs, however the previous two months were revised down.  Another solid report.

I'll have much more later ...

by Calculated Risk on 2/03/2017 08:32:00 AM

From the BLS:

Total nonfarm payroll employment increased by 227,000 in January, and the unemployment rate was little changed at 4.8 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in retail trade, construction, and financial activities.
...
The change in total nonfarm payroll employment for November was revised down from +204,000 to +164,000, and the change for December was revised up from +156,000 to +157,000. With these revisions, employment gains in November and December combined were 39,000 lower than previously reported.
...
In January, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $26.00, following a 6-cent increase in December. Over the year, average hourly earnings have risen by 2.5 percent.
...
[Annual Benchmark Revision] The total nonfarm employment level for March 2016 was revised downward by 60,000 (-81,000 on a not seasonally adjusted basis, or -0.1 percent). ... The effect of these revisions on the underlying trend in nonfarm payroll employment was minor.
emphasis added

This was above the consensus forecast.

Note: I'll post graphs soon - the data is being updated due to the annual benchmark revision.

by Calculated Risk on 2/02/2017 08:27:00 PM

Earlier:, my January Employment Preview and Goldman: January Employment Preview

Friday:
• At 8:30 AM ET, Employment Report for January. The consensus is for an increase of 175,000 non-farm payroll jobs added in January, up from the 156,000 non-farm payroll jobs added in December. The consensus is for the unemployment rate to be unchanged at 4.7%.

• At 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is a 0.9% increase in orders.

• Also at 10:00 AM: the ISM non-Manufacturing Index for January. The consensus is for index to increase to 57.2 from 57.1 in December.

by Calculated Risk on 2/02/2017 05:33:00 PM

In addition to Captain Chaos (aka Agent Orange) ... here are a few random concerns and observations:

• From Bloomberg: China’s Army of Global Homebuyers Is Suddenly Short on Cash

China’s escalating crackdown on capital outflows is sending shudders through property markets around the world. ... In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.

“Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker associate at Keller Williams in Cupertino, California.

If this continues, it could have a significant impact on housing, especially in some areas of the west coast.

• After the election, many analysts thought the priorities of the new administration would be tax cuts, infrastructure spending, and deregulation. Goldman Sachs analysts thought the negative policies - immigration and trade - would be delayed until at least 2018. So far the new administration has delayed the policies with potential short term economic benefits - and pushed the negative policies.  This could have negative economic consequences.

• An airplane broker mentioned to me this morning that the high end used airplane business has slowed recently.  Maybe this is related to less money from China and the strong dollar (fewer foreign buyers).

• A couple of observation about coastal California housing: There are many new high end homes under construction (this is all replacing existing stock with high end homes). I've never seen this many homes under construction in the coastal areas. Also there are many homes for rent (maybe this is just seasonal).  It just seems odd.

by Calculated Risk on 2/02/2017 02:47:00 PM

A few excerpts from a note by Goldman Sachs economist Spencer Hill: January Payrolls Preview

We forecast that nonfarm payrolls rose 200k in January, following an increase of 156k in December, with reacceleration reflecting a combination of lower-than-usual year-end layoffs, favorable weather effects, and further improvement in labor market indicators.

We believe the U3 unemployment rate is likely to fall one-tenth to 4.6% – which would mark a return to the cycle low – in part driven by reduced year-end retail layoffs. We expect average hourly earnings to rise 0.3% month over month and 2.8% year over year, reflecting firming labor markets and state-level minimum wage hikes.

The report will also be accompanied by the annual benchmark revision to the establishment survey as well as the annual introduction of new population controls in the household survey.

CR note: the consensus is for a 175k jobs added in January, and for the unemployment rate to be unchanged at 4.7%.